At a monthly Government meeting that took place on March 6, SBV governor Nguyen Van Binh said that it was the right time for the central bank to lower deposit interest rate ceiling by 1 percent.

Foreign banks are among those that have acted quickly and effected the largest cuts, according to an online report by the Sai Gon Economic Times.

The report says that Australia 's ANZ Vietnam has announced a new structure of deposit interest rates with a maximum of 13 percent per annum.

The Republic of Korea 's Shinhan Vietnam Bank has also lowered its deposit rates to an average of 12.8 percent for different terms. The highest interest rate of 13 percent is applied to deposits with terms from one to three months.

The Hong Kong-Shanghai Banking Corporation (HSBC) Vietnam also plans to bring down interest rates on deposits and will announce specific figures in the coming days, the report says.

Meanwhile, deposit interest rates at domestic banks have also started to decline but slightly.

Since March 1, the Export-Import Joint Stock Commercial Bank (Eximbank) has cut its interest rate on deposits of one to 13 months to 13.85 percent per year, while 15-month deposits will yield 12 percent per year.

Other joint stock commercial banks such as the Vietnam Joint Stock Commercial Bank for Private Enterprises (VPBank) and the An Binh Joint Stock Commercial Bank (AnBinhBank) are also offering 12 percent rates on long-term deposits.

Speaking about the central bank's policy to cut deposit interest rates in order to lower the lending rates, the leader of a major joint stock commercial bank in HCM City , who declined to be named, said it was a reasonable move at this juncture.

Enterprises are hurting because of the high interest rates on loans, he said.-VNA

However, the move is likely to affect some small banks' liquidity so the central bank should anticipate this and have measures ready to support them, either by pumping money into open market operations (OMO) or refinancing them, he said.

Nguyen Thanh Toai, deputy general director of the Asia Joint Stock Commercial Bank (ACB), told VnExpress online that at the current deposit rate of 14 percent, his bank's capital resources are very stable, but small lenders still faced liquidity problems.

If the central bank decides to reduce the ceiling deposit interest rate to 13 percent as it planned, the ACB will still have advantages but small banks would find it more difficult, Toai said.

This would suggest the possibility that small banks will again offer interest rates beyond the 13 percent cap, he said.

The deputy director of a bank with a chartered capital of 3 trillion VND admitted that his bank's liquidity was not a huge problem right now, but its capital mobilisation has already decreased over the last few months.

If the ceiling deposit interest rate is cut to 13 percent, it is difficult to say what would happen to the bank, he said.